Modern marketing trends

- Ancillary Revenue

Ancillary revenue

Ryanair ancillary

‘services’

• 22.1% in 2011 (breakdown)

• €11.10 per booked passenger

• Non-flight scheduled revenues including airport check-in, excess

baggage, debit and credit card fees, sale of bus and rail tickets,

hotels, and travel insurance

• Car-rental

• In-flight sales

• Internet related e.g. commissions on items sold through website

• Google Adsense to monetize FR search results pages sent to

other websites

Different Ways to

Generate Revenues

Baggage

Holidays

Exit Seat

Selling

Food Selling

Scratch

Cards

Baggage fees

In-Flight Entertainment

Lounge Access

Meals/beverages

Travel insurance

Upgrades

Priority boarding

Reservation changes

Seat Assignment

Purchase Middle Seat (Clickair)

Extra legroom

Onboard Selling (Bus, train tickets)

Scratch Cards

Mobile Phones

Payment through Credit and Debit card

Onboard Internet

Flight Related Ancillaries Non- Flight Related

Ancillaries

Car Rental

Hotel/lodging

Fast track through security

Ground Transportation

Currency conversion

Car Parking (Monarch)

Cruises

Golf, Spa’s,

Branded merchandise

Purchase FFPs

Search links on website

(Google Adsense)

Selling adspace on website

Ancillary opportunities

Sell Re-Packaged

Choices and Fares

Customers pay for valuable elements of air travel

above fare, such as seat choices, meal, baggage,

refunds, changes, upgrades

Sell Goods

Onboard/Online

Use customer focus on lifestyle experience and

onboard seat time (captured audience). Opportunity to

market wide variety of non airline goods such as

online gaming, scratch cards, online catalogue,

Sports tickets, etc

Beyond core airline offer – customers can select

Packaged bundles of hotels, car rentals, recreationBuy Dynamic

Bundling of Travel

3 areas of that offer high

potential revenue

opportunities

Core Products

Schedule

Reliability

SafetyReservation

Changes

Excess Baggage

Priority

Boarding

Express check-in

Seat

Upgrades

Food &

Drinks

Seat Assignment

Priority

SecuritySeat

Exit

Mobile

Phones

Internet WiFi

IFE

Unbundled Fares(e.g. Air Canada)

Scratch Cards

Unbundled

Products

Baggage Fees

Lounge

Access

Hotels

Travel

Insurance

Destination

Advertising

Golf

Tourist

Attractions

Cruises

Airport

Transfers

Spa Treatments

Car Rental

Airport

Car Parking

Gambling

Theatre, Concerts and Events Tickets

Resort and Theme Park Bookings

Overseas Vacation Homes

Commission -

based ancillaries

Foreign CurrencyHouse Insurance

Car Insurance

Ancillary Composition

Think CountryMost consumers welcome a broader and deeper

travel offer from an airline that promotes local

Talking points and cementing the association

Local KnowledgeYour airline offers better local travel market

Knowledge than any competitor – a sustainable adv

Brand

Association

A broader involvement in your country travel will

strengthen your brand and franchise

LeverageYour airline is already online and can leverage

technology to strengthen relationships with inbound

travel consumers and your database

Commission This can grow significantly once your airline gains

awareness that your offering exceeds that of 3rd parties

Home Country – Airline is the

Local Broker

Source: 2010 Amadeus

Guide Ancillary Revenue

by IdeaWorks

Ancillary revenue as % of

Total Revenue 2009

Air Canada’s unbundled website

$15 $15

pay pay

pay pay

pay pay

pay pay

pay pay

pay a little

Air Canada’s unit Revenue rose by 22% from 2003 to 2007 since it launched its

branded fares and 48% of customers are buying into a higher fare bracket

Revenues from checked

baggage

• American Airlines generated $70 million in extra revenue

during the 3rd quarter of 2008 from the fees for a first

piece of checked baggage.

• United realised $300 million in additional revenue during

2009 from its new baggage fees.

• Delta was initially reluctant to initiate a fee for the first

piece of baggage. However, it joined other U.S. major

airlines in December 2008 with a $15 fee for the first

piece.

Revenues (in $US millions) from

baggage fees collected by U.S.

major airlines

Reservation Change Fees (in

$US millions) collected by U.S.

major airlines

* A total of 19 carriers reporting their revenues from baggage fees

Source: Bureau of Transport Statistics, Form 41; Schedule P1.2.

Willingness to buy

< 30 hours before

departure

Departure

Internet check-in

Weeks before

departure

Revenue opportunity

before departure

Airfares 44 days

Hotel 42 days

Destination content 24 days

Rental Cars 19 days

Source: Amadeus, July 2008

Average days purchased

prior to consumption

Pre-departure email

Choose Seat

Itinerary

Change Flight

Hotel

Car Rental

Insurance

Purchase Excess Baggage

Destination Content (golf, spas)

Cheap Phone Bills

Make it attractive for customers

to opt in before they set off on their

Journey

Make it to the point

Send email or text message for

reconfirmation

Northwest Airlines - Selling the best seat

Pay $15 per flight for

Selected aisle or exit rows

Fee is waived for elite

Members

United Airlines does the

same thing

Selling Meals

• Many airlines now sell meals on their short-haul flights

• British Airways is even investigating charging passengers

extra for the option of an 'upgraded' in-flight meal.

• Air Berlin offers complimentary snacks, meals, and

beverages to economy passengers. However it also uses

‘Sansibar gourmet meals’. Customers may “upgrade” their

dining experience by ordering a specific gourmet entrée

before departure.

Gambling On Board –

Selling Scratch Cards ?

• 8 out of every 10 people gamble every year

• 1.3% of disposable income is spent on gambling

• Gambling is a $279 billion dollar business

• Internet Gambling represents 6% of this $279 billion

• Estimated that $26.6 billion will be spent during 2012

Ancillary Items that did

not work

• JetBlue - Travel Pillow and Blanket ($7)

• United - Transatlantic Buy on Board

• US Airways - Buy on Board Soft Drinks ($2)